The response from the Right to all questions of “fat-cat” pay is that this is simply the market rate, and that any salary is justified if the shareholders think it will earn them money. Risk and failure are built into this equation and one should insure oneself against them.

On this basis, then, a few questions:

1. Did Northern Rock, under Applegarth, make money for his shareholders prior to the recent debacle?
2. How does this pay-out compare to the bonus he would have received, had NR posted a healthy profit? If it is substantially less, then we face the argument that he has, mathematically, been “punished” for failure.

Thanks for the info Sunny! Anyone who buys NR shares at this point would have to be mad!

Never mind the fat cat pay. Go read the FT article and the excellent blogging by Richard Murphy at http://www.taxresearch.org.uk/Blog on the unethical structuring of Northern Rock debt by top managers to put the Northern Rock charity and the deposit savers first in line when the collapse occurs…

While I really struggle to defend someone like Applegarth (whose only historical parallel is the Captain of the Titanic), I might be a little more careful than Steve in my language. Reasonable people might think it lowers him in their estimation, if you get my drift. Then again, reasonable people wouldn’t have bet the house on the international money markets.

It’s worth pointing out, though, that borrowers and savers knowingly took advantage of the offers Northern Rock’s strategy was funding, and all forms of investment carry risk. My take is that this bank should have been allowed to fail as a lot of people would have learned a lot of lessons. As it is, we have all ended up paying for the folly of the few.

Incidentally, Robert, fat cat pay is not a disease combined to the private sector. Recent research shows that after financial services, the biggest pay packets are infact at director level in the public sector. The directors of privately-owned firms (i.e., most UK businesses) are, on average, paid less.

No, Morris, I don’t get your drift.

Explain please.

It wasn’t not just Applegarth. The former chairman, Viscount Ridley, has long been a proselytiser for extreme free market policies. His book “The Origins of Virtue” has a chapter on trade with the telling sub-title “in which exchange makes two and two equal five.” There, in a nutshell, you have libertarian economics and Northern Rock’s operational strategy for the past few years. I wouldn’t mind, but these guys have wiped 20% off the value of my Halifax shares…